Here in the finite world, most of the money moving around is in services, while most of the land is disconnected from that economy. How are you getting 1-2 trillion in tax revenue from land without making, say, farming economically unviable? Will it just be riddled through with exceptions and carveouts?
An acre in midtown Manhattan might be worth $250 million to as much as $1.25 billion, before we look at the building that is on it. (An acre is a big lot in Manhattan -- a whole city block.) A tiny lot in Manhattan sells hundreds of thousands of dollars, due to its location, which the seller didn't create. The old building on it may be worth nothing.
And the 100x100 lot with a new hotel on it and the 100x100 lot next door with just a parking lot, or maybe just a chain link fence, would be assessed identically. The unimproved value of the land.
Farmers would pay little under LVT. In fact they'd be advantaged, because their buildings and equipment would not be taxed. The owners of sites in our major cities would pay in proportion to the value of their site. And frequently the land is already leased to someone who puts a building on it, which gives a sense of the value of the land at the time the lease was negotiated -- a value which is not always made public.
And why would we want to tax wages, or sales, if we could obtain from the value of land much of the revenue we need, while providing a boost to the economy via removing the deadweight loss of dumb taxes?
On that note, is the inherent land value of a lot in Bushwick way higher then 20 years ago now that they've gentrified? Is neighborhood desirability an 'unimproved' attribute?
I very much get where you guys are coming from in a philosophical sense, but I feel like there are a million wrenches in the works that everyone's ignoring because the theory is so nice.
Yes. Desirability and infrastructure near land increases it's unimproved value.
If you want to pay less taxes, you move to an area that doesn't do this sort of investment. If you want nice stuff, you can move in and pay for it, and be content that people who are against improvement are kicked out by higher taxes.
So we need additional correctives to the additional injustices that capitalism has invented since Henry George's time, like our NIMBY-promoting land use decision system. We could, for example, adopt something like Japan's more federal system.
What LVT proponents really want is some kind of oracle that will tell them just how much of the (estimated) market value of a property is due to the direct efforts of the past and present owners of the property and how much is external benefit from the actions of others. Two problems with this approach are (a) there is no such oracle and (b) the "unimproved" value includes external benefits property owners provide to their communities which are not included in the assessed value of any obvious material improvements to their own properties. There is something fundamentally self-defeating in any proposal which would result in taxing people extra for their contributions to the public good.
The idea that land has any "unimproved value" to be taxed is flawed from the start. In fact land has no economic value until someone claims it and puts it to use. If you walled off a piece of land such that no one could reach it, even an otherwise choice parcel in the middle of Manhattan, it might as well not exist. All economic value is the result of human improvements, though they don't always take the form of physical changes to the property. LVT takes physical improvement as a proxy for improvements attributable to the property owner(s), but this is at best a lower bound and significantly understates the owners' own contributions to the property value.
The situation is almost tautological. I mean, suppose Amazon builds a giant shipping depot in the middle of nowhere. The land was worth nothing before. Without the depot, it would be worth nothing now. Then town arises around giant depot. Town tries to raise taxes on Amazon says "still worth nothing if we leave". Who's right?
Edit: Some of this is more or less what’s happening when buying a property based on a mortgage. The bank decides what the property might be worth, and what the new owner will be able to pay in rent. It must be possible to do slight adjustments in this scheme so that the rent ends up as tax instead.
As Bushwick becomes popular, because of better transit, or community amenities or whatever, yes, the unimproved value of the sites served by them go up. A school develops an excellent reputation? Up go the land values. (Some say that in most suburban towns, the superintendent of schools is the highest paid employee, in part because s/he can influence "property values" -- more precisely, land values -- more than any other single person.)
My first acquaintance with Elizabeth Warren came from a book she wrote about 2003, whose title was something like "The Two Income Trap: How Middle Class Parents are Going Broke" and in part it was from seeking the best public schools for their children, and paying a huge share of their income for it, seldom to be matched by single parents.
We know what the total budget is right now, at a national, state, and local level. And we know where that income is coming from -- mostly a mix of income, property, sales, payroll, corporate, and other taxes. And crucially we know exactly what the breakdown of that taxation burden is on various people in various financial situations.
I want to see the numbers on this Georgian proposal that show the total revenue at federal, state, and local levels. Is the total amount of tax the same? Or are we talking about radically reduced tax revenue in total? And how does the distribution of who pays this tax change under the new system? Then, and only then, with these figures, we can look at the proposal and see if it remotely makes sense using the typical criteria of (a) is there enough funding for current levels of government services at all levels, (b) are the changes in who's paying how much in taxes fair and equitable, etc.
I really want to see a full proposal on exactly what a typical individual and corporate tax bill for a variety of common situations, and I want to see that those numbers all add up to enough revenue.
But what we really care about is what the system looks like a decade in, after property values have massive changes. And what it looks like 50 years in, after cities have been remade to reflect the shift in tax costs. I don't think any modern day Georgist argue for "single tax." Remember that income tax wasn't in place in the US when Henry George started writing!
So any modern plan will Lokey include shifting tax bases, over time, to rely more heavily on LVT and less on sales tax and other regressive taxes. This will require adaptation and policy change over the years and decades, rather than saying ahead of time that they can predict the future with absolute certainty.
There were also significant tariffs on imported goods. Sugar and tea, which the poor liked as well as the rich. One of HG's books was "Protection or Free Trade" which Milton Friedman called his favorite book on the topic. (Then again, Friedman repeatedly called land value taxation the "least bad" tax, but never found the motivation to promote its application.) I had occasion to dip into POFT last week, and found it pleasurable and interesting reading. Its at Schalkenbach's website, among other places.
Yes, a shift could be quite gradual, though I suspect that once it was begun, and people began to see the beauty of untaxing buildings, wages, sales, it would likely be sped up.
And tax revenues reach the government without middlemen collecting their share, so the cost will be lower to those who pay.
It does not seem at all clear to me that most economic activity is in services and not in resources/monopoly ownership.
> farming economically unviable
Farming is already unviable, that's why we subsidize it so heavily.
I'm fine with taxing the hell out of Exxon, btw, or at least not giving them cash-in-a-briefcase subsidies, but you're not going to replace the income tax on that.
We collected 3.46 trillion in income taxes last year. How do you get there on a land-value tax? Do we weight it so Manhattan land owners are paying more in tax than the entire midwest?
That said, you roll out the new policy gradually by reducing labor related taxes while increasing land and monopoly related ones.
After several iterations you should expect convergence to a new stable position.
It's better to prefer iterative deployment over big bang changes. Not only in software.